Zinger Key Points
- An investor would need to own $178,500 worth of Gap to generate a monthly dividend income of $500.
- A more conservative goal of $100 monthly dividend income would require owning 2,000 shares of Gap.
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The Gap, Inc. GPS reported better-than-expected third-quarter financial results on Thursday.
Gap reported earnings of 59 cents per share, exceeding the analyst consensus estimate of 18 cents. Quarterly sales of $3.767 billion beat market expectations of $3.610 billion, a 7% decrease from sales of $4.039 billion in the same period of 2022, according to Benzinga Pro.
With the buzz around Gap following upbeat quarterly earnings, some investors may be eyeing potential gains from the company’s dividends too. As of now, Gap offers an annual dividend yield of 3.36%, which is a quarterly dividend amount of 15 cents per share (60 cents a year).
So, how can investors exploit its dividend yield to pocket a regular $500 monthly?
To earn $500 per month or $6,000 annually from dividends alone, you would need an investment of approximately $178,500 or around 10,000 shares. For a more modest $100 per month or $1,200 per year, you would need $35,700 or around 2,000 shares.
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To calculate: Divide the desired annual income ($6,000 or $1,200) by the dividend ($0.60 in this case). So, $6,000 / $0.60 = 10,000 ($500 per month), and $1,200 / $0.60 = 2,000 shares ($100 per month).
Note that dividend yield can change on a rolling basis, as the dividend payment and the stock price both fluctuate over time.
How that works: The dividend yield is computed by dividing the annual dividend payment by the stock's current price.
For example, if a stock pays an annual dividend of $2 and is currently priced at $50, the dividend yield would be 4% ($2/$50). However, if the stock price increases to $60, the dividend yield drops to 3.33% ($2/$60). Conversely, if the stock price falls to $40, the dividend yield rises to 5% ($2/$40).
Similarly, changes in the dividend payment can impact the yield. If a company increases its dividend, the yield will also increase, provided the stock price stays the same. Conversely, if the dividend payment decreases, so will the yield.
GPS Price Action: Shares of Gap jumped 30.6% to close at $17.85 on Friday.
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